A just-leaked draft impact assessment on the modernization of European copyright rules could spell the end for many online services in Europe as we know them. The document's recommendations foreshadow new a EU Directive on copyright to be introduced later this year, that will ultimately bind each of the European Union's 28 member states. If these recommendations by the European Commission are put in place, Europe's Internet will never be the same, and these impacts are likely to reverberate around the world.

The 182-page document identifies three general objectives—ensuring wider access to content, adapting copyright exceptions to the digital and cross-border environment, and achieving a well-functioning marketplace for copyright. In this initial article we examine the recommendations that fall under the third of these three objectives, which are amongst the most alarming proposals, including new obligations on Internet platforms, and new copyright-like powers for news publishers.

More specifically, this article will look at two of the proposals for what the Commission calls “upstream” problems, or difficulties faced by copyright owners in extracting value from the use of content online. We'll deal with other parts of the document in later posts.

“Sharing of Value” Proposal Exposes Rightsholder Greed

The assumption that copyright owners should be entitled to share in any value created by online platforms is never really examined by the Commission. The theory is that because online platforms are doing rather well in the digital environment, and because traditional publishing industries are doing less well, this gives the publishers some kind of claim to share in the profits of the platforms. It's a questionable starting point, and as we'll see, the recommendations that flow from it are ill-considered and harmful.

The first of the two problems that copyright owners supposedly face in extracting such value is that there is a large amount of user-generated content uploaded by users to sharing platforms, and that European law does not place an obligation on platforms to proactively police this content for possible copyright infringement, but instead relies on the latter to identify that the material has been uploaded without authorization and to request its removal. That existing law strikes a reasonable balance, similar to Section 512 of the Digital Millennium Copyright Act in the U.S.

Major entertainment companies characterize this as a problem because it means that copyright owners have less ability to ask online platforms to pay licensing fees for their content. In the case of user-generated content platforms (think YouTube and Soundcloud), the platform can simply offer to remove a copyright-owner's content rather than paying for it—or, in practice, to voluntarily offer a compromise such as YouTube's Content ID that automatically scans uploaded content and shares ad revenues for content identified as the copyright owner's.

As for platforms that offer access to their own library of content (think Netflix and Spotify), rightsholders contend that they may be willing to pay less in order to remain competitive with the user-generated content platforms. In either case, major copyright holders contend that platforms should be paying them more for the content that the platforms make available online.

The European Commission's proposed solution, however, is worse than the supposed problem. The Commission is proposing that user-generated content platforms should be forced to seek, in good faith, to conclude private agreements with copyright owners and to put in place “appropriate and proportionate content identification technologies”. In short, the use of something like YouTube's Content ID system is being made compulsory.

This is a treacherous idea for many reasons, but just to give two:

• Automated systems, no matter how technically sophisticated, can never replace human judgment about whether user generated content infringes copyright. This is because copyright exceptions that exist in the United States (such as fair use) and in various forms across Europe (such as quotation, parody, and news reporting), mean that not every act of copying is an infringement. As a result, Content ID-type systems will inevitably misflag content, and wrongly allow a copyright claimant to monetize it or take it down.
• Content ID-type systems are extremely expensive. YouTube reportedly spent $60 million on the development of Content ID, but even if a new entrant would have to spend a small fraction of that on a similar system, that would still be an insurmountable obstacle to the majority of small and medium enterprises, and to non-profit organizations and users ranging from Wikipedia, all the way down to your brother who hosts a fanart messageboard on a desktop PC in his bedroom.

More broadly, this kind of insidious regime of private agreements pushed by government is the kind of cop-out from good lawmaking that EFF calls “Shadow Regulation”; a concept that we'll be introducing in more depth in subsequent Deeplinks posts, where we will give some other examples of the same. But in short, such agreements can embody the worst of all possible approaches, by combining the coercion of government regulation, with the lack of accountability of corporate self-regulation.

A Link Tax in Favor of News Publishers

The European Commission doesn't stop there, but also has a similarly ham-fisted proposal to address the declining revenues of news publishers from their print publications, which leaves them with fewer resources to continue to invest in journalism.

We have previously agreed that this is a real problem. But where the Commission errs is to pin responsibility for this problem on the reuse of news content by Web platforms under exceptions to copyright; and it compounds this error by seeking to limit their use of such copyright exceptions going forward.

The Commission's proposal is to award publishers a new copyright-like veto power, layered on top of the copyright that already exists in the published content, allowing them to prevent the online reuse of news content even when a copyright exception applies. This veto power may last for as little as one year, or as many as 50—the Commission leaves this open for now.

This kind of veto power has been described as a link tax—notwithstanding the Commission's protestations that it isn't one—because when the publisher controls even the use of small snippets of news text surrounding a hyperlink to the original article, it essentially amounts to a tax on that link. The result, as seen in Spain, will be the closure of online news portals, and a reduction in traffic to news publishers.

A new wrinkle on this link tax proposal is that the Commission also proposes that publishers who have received a transfer of copyright from authors should also be entitled to collect revenue from whatever copyright levies member states may impose to “compensate” authors for use of their content under copyright exceptions. The notion that “compensation” is needed for users exercising their rights under copyright is a thoroughly perverse one, as we have previously explained. This addition to the link tax proposal is a gift to copyright collecting societies that will further increase the cost and complexity of lawfully reusing content.

What Happens Now?

The impact assessment is not yet a draft law, but it is a crystal clear indication from the European Commission about the content of the law that is is proposing to develop as a draft for approval by the other European institutions, namely the European Parliament, and the Council of the European Union. Users will have further opportunities for input into the proposals when they reach that stage.

But we'll have the best chance of stopping these misguided proposals if European officials are alerted to our concerns right away. They need to understand that Internet users won't accept the “Shadow Regulation” of intermediaries by requiring them to enter into expensive and error-prone arrangements with copyright owners for the automating flagging of user content. Neither will they accept a new “link tax” for news publishers that could stifle the dissemination of news online.